Thursday, November 8, 2012

Getting into this mess

So the question invariably comes up, "How did you get yourself into 60k into debt?" There's another relevant QA. "How did you go bankrupt? Slowly, then suddenly."

So looking back on some of the balances, it's at least somewhat assuring if you can attach a number to something concrete. Mostly, these balances are a result of stupid decisions. In reality, they are the result the statistical rule that says that people spend more with plastic than with cash. Durrrr.

Decision #1 - $16290
My parents had a Chase card with a 2% until paid off offer on a card with a 30k line. Though I would have significantly higher payments, it made sense to move about 25k of ~9% student loan debt into a 2% until paid off offer, even with the 3% up to $200 xfer fee. In reality, my student loan payment on a ~50k balance is about $500/month, but in reality, I'm paying closer to $850/month as I pay this particular Chase card down.

Stoooooopid Decision #2 - $12806
My parents had a second Chase card with a 3% until paid off offer on a card with another high line. This essentially was me refinancing a 6% 18k car @ 3%. This was also a fantastic deal, however, I fudged up several years ago.

Took another 12k out on the car @ 5%

Paid off 12k worth of debt.

Paid down car to around 8k

Sold the car for the balance as I had a second car.

This 12k is a stupid me paying off a car I no longer enjoy or own. *tear*

College Idiot Decision #3 - ~$12k
I graduated in 07 with about 12k in debt. I figured I'd pay this stuff off once I got a real job and got paid the big bucks. In reality, the big bucks also coincided with the 2008 crash bringing down my parents support cushion.

Pre-2007 Parental Conversations"Hey, I need $800 for shits and giggles, food, gas, living, etc." "Okay son, I'll deposit the $ in your account later today." I wake up tomorrow morning and my bank account has gone from a $15 balance to over 4 figures.

Post-2007 Parental Conversation"Hey, I'm hurting on repaying school debt." "Sorry son, think you could take over the mortgage on the house, since you're the one living there?" "Shhiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiit."

Ridiculous Decisions #3 - XXX - ~$12k
For al the other 2-5k balances, thats what you call SPENDING CREEEEEP. iPads, iPhones, Groceries, Gas, laptops, camera gear, etc etc. I can account for about 8k. Everything else was just going out to eat, gas for going out and spending money I didn't have to keep up appearances.

$5k camera gear - At least I had crap to show for some of the balances. I eventually sold the gear and netted around ~3k to pay for the wedding.

$3k life necessities - Probably for the last year or so, I've been spending on average $300/month to cover groceries & gas.

Everything else is well.... unaccounted for. Much of the electronics were purchased with cash or 0% financing offers that were paid off within the 0% period. I'm really trying to think whether I could have survived without the credit. I'm pretty positive that I could have survived. It would have been slightly embarrassing and I'd have had to have done a ridiculous acrobatic juggle, but I think it could have been done. Why? Here's a short story.

My parents are relatively successful immigrants. Oddly, their siblings that also immigrated to the States are also successful as well. 6 figure annual incomes, business owners, nice house & cars with excellent credit, etc etc. So I ask my parents one day, "The stat on business is that there's only 1 standing after 10 years or so and all others go away. How is it that there's 6 businesses that all lasted more than 10 years by our various family members and are still going?"

"We came to America with nothing. We couldn't be employed since our degrees don't mean anything and we can't speak the language. It was either get on by or die."

And how apt that advice is. There's the other story of the general who had his Army burn their ships before battle. As life has shown, we have tremendous amount of resilience to scrounge together what we can to survive.

My credit cards are shredded. The only backup I have is any cash that I may be able to save. I built in a budget buffer, but the emergency fund has to start stat. I guess I'm a bit impatient and would have rather have paid off debts than save for an emergency fund. My credit is still good. There's no derogatory entries, late payments, judgements, etc. Just a very high credit utilization ratio that needs to come down. So it sucks to get declined for new credit to try to play the low interest balance transfer game, but it's finally caught up with me.

For those with spouses battling the money game, there was a visible turning point for my wife. It was when I shred all the cards. That's when she finally got on board and knew I was talking business. There was a little bitching here and there about, "See, we don't have a card to put it on and you have no cash." "OMG we can't pay for gas and we're 800 miles from home without GAS MONEY to get BACK!"

Several weeks later the tone changed, "I'm so glad we paid for the trip in cash. There's no looming CC balance to pay off."